This article is a sponsored feature from Mining.com.au partner Thomson Resources Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
When in December 2020 Thomson Resources (ASX:TMZ) identified Mt Carrington as one of the main projects it wanted in its New England Fold Belt Hub and Spoke consolidation strategy, it had a narrower focus.
Then-owner of the asset, White Rock Minerals (ASX:WRM), had announced in early December that year it had terminated its non-binding earn-in agreement with a third party. Keen to get its foot on it, Thomson Resources engaged the company that same day to offer the same deal only binding.
Thomson Executive Chairman David Williams explains: “We wanted to make it a no-brainer for White Rock so we were prepared to do a mirror deal, where the earn-in terms were for the development of the small gold project at Mt Carrington with earn-in terms being payments and completing a DFS, EIS, and FID.
We always figured we could renegotiate the terms later once the environment was more conducive to doing that.”
The company spent a bit of time in the early stages of the earn-in getting a better understanding of the project site and opportunities and completed its minimum obligations.
From the very beginning, the strategic value of the Mt Carrington asset as part of its ‘aggressive’ New England Fold Belt Hub and Spoke consolidation strategy was evident.
From the very beginning, the strategic value of the Mt Carrington asset … was evident
Thomson holds a diverse portfolio of mineral tenements across the New South Wales/Queensland border. Its strategy has been designed to create a large precious (silver-gold), base, and technology metals (zinc, lead, copper, tin) resource hub that could be developed and potentially centrally processed.
Opportunity opens up
So, when the environmental bond was recalculated in late 2021, Thomson saw the opportunity to start renegotiating the terms of the earn-in with White Rock. At the same time its work on the hub and spoke strategy was more advanced to a point where Williams suggests that White Rock became more comfortable the strategy was likely to progress, and hence presented a stronger environment for the Mt Carrington project to progress.
Thomson was successfully able to move the terms from an outcomes and payment basis, which would likely have cost it in the order of $25-30 million, to a simple 2 stage earn-in with the terms being a specified amount to spend on exploration and care and maintenance.
The renegotiated terms were $5 million to be spent over 3 years to earn 51% and a further $2m over 2 years to move to 70%.
Thomson also made a strategic move as part of those negotiations that has led to the company to take a more refined view of the ‘bigger picture’ in the Mt Carrington Project.
Williams notes: “The original terms only focused on progressing the gold mining/processing pathway, there was no incentive for Thomson to explore or look at the bigger opportunity presented by the polymetallic nature of the central deposits.
Further, there was always the risk that the DFS, EIS, or FID might not work and the gold only project might not progress. With the work we were doing behind the scenes we could see that there was a much better pathway by developing the polymetallic aspect and we could see that the likely processing pathway would fit in well with the fold belt hub and spoke strategy.
“By changing the terms, we were then able to focus on developing the polymetallic resources and their fitting in with the hub and spoke strategy”
By changing the terms, we were then able to focus on developing the polymetallic resources and their fitting in with the hub and spoke strategy.”
As Williams notes, companies previously have only looked at the deposits in this region individually with a focus on just the gold or silver. Thomson took a macro view and assessed it from a perspective of scale where it could get value from a suite of minerals.
“Things change over time as does the relative value of the commodities change. We know now just how important zinc and copper have become, as well as other minerals there.
So, it’s not just looking at one particular mineral that you’re trying to make your name on, it’s stepping away from just what it was specifically mined for before to assessing what else is around.
Companies might say ‘well we’re just looking at the gold, I know there’s gold there’.
What we’ve said is ‘hang on, there’s a whole mineral system here. What’s going on? Let’s look at the bigger picture. Let’s look at some of the indications we’re getting from those holes in between and look to see whether there’s more around it that pulls it together’.”
Refined focus
Williams reaffirms that modern exploration has tended to focus on the gold and silver only aspects of known deposits in the region, essentially centred around previous mining.
When Thomson Resources was looking at the previous drilling undertaken by White Rock and others, it could see there was a lot of zinc and copper, as well as the gold and silver.
“Further, these other minerals occur outside and between the pit shells used for the existing White Rock published resources. As we have mentioned, we think there is a real likelihood that the various deposits in the central area all coalesce into a larger polymetallic deposit.
“we think there is a real likelihood that the various deposits in the central area all coalesce into a larger polymetallic deposit”
As we demonstrated with the updated Mineral Resource Estimates, we recently developed for just the Strauss and Kylo pit shells, by bringing in the zinc and copper, just within those existing defined pit shells, the Mineral Resource Estimates increased by 50% in aggregate compared to what had been previously published by White Rock.
There is clear additional polymetallic mineralisation both beneath those pit shells and beside them.”
Thomson’s focus is now on “folding in the other minerals associated with the gold and silver”.
By that, Williams refers to previous drilling that gave rise to the MREs published by White Rock that showed there was not only gold and silver in commercial quantities but also other minerals such as zinc and copper.
“However, when those Mineral Resource Estimates were done, they only brought in the gold and silver and ignored the other minerals when estimating the resources. That was sort of understandable as they were not looking at developing a polymetallic processing plant, just a gold or silver one.
However, under the hub and spoke strategy, whilst Thomson is primarily focused on silver, the strategy is also looking at extracting the other associated minerals such as gold, zinc, copper, lead and tin. Hence Thomson can look wider than just gold as far as processing is concerned.”
Coalescing the deposits into one
In order to achieve that, Thomson will do its own updated MREs for each of the Mt Carrington deposits and bring in the copper and zinc as it has done with the first 2 – Strauss and Kylo. That will assist the company to see where the polymetallic resources are open, which will assist it in designing the drilling programs.
The exec chairman adds: “We will also do further metallurgical studies to refine how the resources are likely to fit within the hub and spoke strategy. That will then lead into us undertaking drilling programs to test these extensions and the thinking on the coalescing of the deposits into one.”
Our idea has been not to be narrow in both commodities and don’t be narrow on the location, if you’ve got the scale. And we have scale.”
Williams says the company has demonstrated the potential to significantly increase the overall resources at Mt Carrington. The key moving forward is what Thomson calls its central processing pathway study stage 1, which is essentially a scoping study or preliminary economic assessment. This will tell Thomson how it will all work together and will include a techno-economic evaluation.
The company will also have the assay results from the drilling at Silver Spur and then in the next quarter it will be looking at doing some drilling at Webbs.
In August the company intersected zinc-lead-copper-silver mineralisation at the historic ‘high-grade’ Silver Spur mine located at the 100% owned Texas silver-base metal project in southeast Queensland. The second hole drilled on the northern margin of the Silver Spur mine intersected a broad zone of quartz veining and alteration with multiple veins of up to 5cm of base metal sulphide and silver mineralisation. The dominant sulphide is brown sphalerite (zinc sulphide) with silver grey galena (lead sulphide) and minor yellow pyrite-chalcopyrite (iron/copper sulphide).
“Once things dry out at Texas, we will look to return there and resume the drilling programs. Going along besides that will be our updating of the Mt Carrington Mineral Resource Estimates to include the polymetallic resources, which we plan to do deposit by deposit.”
Willams notes that Thomson is very confident of achieving the spends required under the revised Mt Carrington earn-in agreement.
“It simply comes down to what that work produces as far as Mt Carrington’s involvement in the hub and spoke strategy is concerned. Having said that, the reason we renegotiated the earn-in terms rather than walk away from it is that what we have seen gives us reasonable confidence that Mt Carrington will play an important part in our hub and spoke strategy.”
Opening the universe of potential buyers
To assist Thomson in pooling together this suite of minerals, it has mandated consultancy firm Open Minerals, which specialises in understanding the concentrate purchase market, to advise on potential buyers of its products.
As part of its process with its stage one study, the company brought in Open Minerals to help it identify the universe of buyers for its suite of minerals, as well as assessing what value can be derived from these minerals as part of the concentrate.
“do we just produce a concentrate or do we take those concentrates further and break out some of those valuable minerals into a saleable form?”
“We created a question for ourselves – do we just produce a concentrate or do we take those concentrates further and break out some of those valuable minerals into a saleable form?”
This question will be looked at extensively in the next 6-12 months.
Open Minerals’ role is to assess what Thomson ‘should’ produce from a concentrate perspective as the firm is aware of the preferences of smelting companies globally. Their independent assertions will also enable Thomson to tweak its products so they are ‘more saleable’.
Williams adds: “I’m not suggesting we’re going to be one of those companies where all of a sudden, we find rare earths and start looking at that.
It makes sense that while we do our own drilling, we get a full suite of assays to see what else might be there. The critical minerals, or high-tech minerals that the various governments are talking about, what we have is quite extensive.
It’s a question of quality, but if you’re not even looking at these minerals then you can’t even ask that question.”
What is known is that in December 2020 when Thomson Resources identified Mt Carrington as one of the main projects it wanted in its consolidation strategy, the question of whether it should execute an earn-in agreement with White Rock seems to be answered.
From all appearances, it has been a resounding yes.
Write to Adam Orlando at Mining.com.au
Images: Thomson Resources Limited
